Le Château reports first quarter results

MONTREAL, June 9 /CNW Telbec/ - Le Château Inc. (TSX: CTU.A) today reported that sales for the first quarter ended May 1, 2010 decreased 1.2% to $70.9 million from $71.8 million for the first quarter ended May 2, 2009. Comparable store sales decreased by 4.9% versus the same period a year ago.

Net earnings for the first quarter ended May 1, 2010 were $4.5 million compared to $5.1 million for the first quarter ended May 2, 2009. Earnings per share (diluted) for the first quarter were $0.18 per share versus $0.21 per share the previous year. Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the first quarter amounted to $11.0 million or 15.5% of sales, compared to $12.0 million or 16.7% of sales last year.

During the first quarter, the Company opened one store, closed one and expanded nine existing locations, resulting in the addition of 23,000 square feet or 2.0% to the Le Château network, bringing the total floor space at end of period to 1,169,000 square feet.

    
    Dividend declaration
    --------------------
    

The Board of Directors has declared a quarterly dividend (constituting eligible dividends for income tax purposes) of $0.175 per Class A subordinate voting share and Class B voting share. This is the 67th consecutive dividend declared by Le Château, and is payable on August 17, 2010 to the shareholders of record at the close of business on July 30, 2010.

    
    Normal course issuer bid
    ------------------------
    

The Company announced today that it intends, subject to the approval of the Toronto Stock Exchange, to proceed with a normal course issuer bid. Under the bid, the Company may purchase up to 5% of the issued and outstanding Class A subordinate voting shares of the Company. If approved by the TSX, the bid will commence on June 19, 2010 and may continue to June 18, 2011.

The directors of the Company have concluded that purchases of up to 5% of the issued and outstanding Class A subordinate voting shares, in the appropriate circumstances, would be a desirable use of the Company's available funds and, therefore, would be in the best interests of the shareholders. As a result of such purchases, the number of issued shares would be decreased and, consequently, the proportionate share interest of all remaining shareholders would be increased on a pro rata basis.

    
    Annual General Meeting
    ----------------------
    

The Company's annual general meeting is scheduled for June 16, 2010 at its head office located at 8300 Décarie Boulevard. The record date for this meeting was May 12, 2010.

    
    Profile
    -------
    

Le Château is a leading Canadian brand in specialty retailing, offering a broad array of contemporary fashion apparel, accessories and footwear for style-conscious women and men. The Le Château brand is synonymous with ageless fashion at accessible prices and is sold exclusively through the Company's 231 retail locations, of which 228 are located in Canada and 3 in the New York City area. The Company's stores are primarily found in major urban shopping malls, complemented with high pedestrian-traffic, street-front locations. In addition, the Company has 9 stores under license in the Middle East.

The Company's 50-year tradition of vertical integration, a design and manufacturing approach to retailing, makes it unique among Canadian fashion merchants.

    
    Non-GAAP Measures
    -----------------
    

In addition to discussing earnings measures in accordance with Canadian generally accepted accounting principles ("GAAP"), this press release provides earnings before interest, income taxes, depreciation and amortization ("EBITDA") as a supplementary earnings measure. Depreciation and amortization include the write-off of fixed assets. EBITDA is provided to assist readers in determining the ability of the Company to generate cash from operations and to cover financial charges. It is also widely used for valuation purposes for public companies in our industry.

The Company also discloses comparable store sales which are defined as sales generated by stores that have been opened for at least one year.

The above measures do not have a standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other companies.

    
    Forward-Looking Statements
    --------------------------
    

This news release may contain forward-looking statements relating to the Company and/or the environment in which it operates that are based on the Company's expectations, estimates and forecasts. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and/or are beyond the Company's control. A number of factors may cause actual outcomes and results to differ materially from those expressed. These factors include those set forth in other public filings of the Company. Therefore, readers should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements speak only as of the date made and the Company disavows any intention or obligation to update or revise any such statements as a result of any event, circumstance or otherwise except to the extent required under applicable securities law.

Factors which could cause actual results or events to differ materially from current expectations include, among other things: the ability of the Company to successfully implement its business initiatives and whether such business initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; changes in consumer spending; general economic conditions and normal business uncertainty; customer preferences towards product offerings; seasonal weather patterns; fluctuations in foreign currency exchange rates; changes in the Company's relationship with its suppliers; interest rate fluctuations and other changes in borrowing costs; and changes in laws, rules and regulations applicable to the Company.

The Company's financial statements and Management's Discussion and Analysis for the first quarter ended May 1, 2010 are available online at www.sedar.com

    
    CONSOLIDATED BALANCE SHEETS
    ---------------------------
                                             As at        As at        As at
    (Unaudited)                              May 1,       May 2,  January 30,
    (In thousands of dollars)                 2010         2009         2010
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash and cash equivalents            $   8,163    $  20,158    $  23,411
    Short-term investments                  46,000       20,000       45,000
    Accounts receivable                      2,811        3,616        2,454
    Income taxes refundable                  2,484        1,371        1,602
    Derivative financial instruments           158            -           59
    Inventories                             71,453       57,590       61,234
    Future income taxes                          -          149            -
    Prepaid expenses                         7,752        6,950        1,308
    -------------------------------------------------------------------------
    Total current assets                   138,821      109,834      135,068
    Long-term investments                        -       10,000       10,000
    Fixed assets                            92,580       87,659       88,437
    Intangible assets                        2,724        2,255        2,527
    -------------------------------------------------------------------------
                                         $ 234,125    $ 209,748    $ 236,032
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Accounts payable and accrued
     liabilities                         $  27,467    $  24,457    $  27,151
    Dividend payable                         4,310        4,239        4,293
    Derivative financial instruments             -          470            -
    Current portion of capital lease
     obligations                                 -          677            -
    Current portion of long-term debt       11,938        7,885       11,752
    Future income taxes                         47            -           19
    -------------------------------------------------------------------------
    Total current liabilities               43,762       37,728       43,215
    Long-term debt                          18,009       17,267       21,464
    Future income taxes                      3,910        3,176        3,910
    Deferred lease inducements              10,056        9,513       10,222
    -------------------------------------------------------------------------
    Total liabilities                       75,737       67,684       78,811
    -------------------------------------------------------------------------

    Shareholders' equity
    Capital stock                           35,329       30,997       34,335
    Contributed surplus                      2,087        2,643        2,159
    Retained earnings                      120,861      108,745      120,687
    Accumulated other comprehensive
     income (loss)                             111         (321)          40
    -------------------------------------------------------------------------
    Total shareholders' equity             158,388      142,064      157,221
    -------------------------------------------------------------------------
                                         $ 234,125    $ 209,748   $  236,032
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
    --------------------------------------------
                                                               For the
                                                          three months ended
    (Unaudited)                                           May 1,       May 2,
    (In thousands of dollars)                              2010         2009
    -------------------------------------------------------------------------
    Balance, beginning of period                     $  120,687   $  107,914
    Net earnings                                          4,484        5,070
    -------------------------------------------------------------------------
                                                        125,171      112,984
    Dividends declared                                    4,310        4,239
    -------------------------------------------------------------------------
    Balance, end of period                           $  120,861   $  108,745
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF EARNINGS
    -----------------------------------
                                                                For the
    (Unaudited)                                           three months ended
    (In thousands of dollars, except per                  May 1,       May 2,
     share data)                                           2010         2009
    -------------------------------------------------------------------------
    Sales                                            $   70,896   $   71,775
    -------------------------------------------------------------------------

    Cost of sales and expenses
    Cost of sales and selling, general and
     administrative                                      59,920       59,798
    Depreciation and amortization                         4,214        4,303
    Interest on long-term debt and capital lease
     obligations                                            446          377
    Interest income                                        (163)        (273)
    -------------------------------------------------------------------------
                                                         64,417       64,205
    -------------------------------------------------------------------------
    Earnings before income taxes                          6,479        7,570
    Provision for income taxes                            1,995        2,500
    -------------------------------------------------------------------------
    Net earnings                                     $    4,484    $   5,070
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net earnings per share
      Basic                                          $     0.18    $    0.21
      Diluted                                              0.18         0.21

    Weighted average number of shares
     outstanding ('000)                                  24,551       24,223


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    -----------------------------------------------
                                                                For the
                                                          three months ended
    (Unaudited)                                           May 1,       May 2,
    (In thousands of dollars)                              2010         2009
    -------------------------------------------------------------------------
    Net earnings                                     $    4,484    $   5,070
    -------------------------------------------------------------------------
    Other comprehensive income
    Change in fair value of forward exchange
     contracts                                              158         (551)
    Realized forward exchange contracts reclassified
     to net earnings                                        (59)      (1,449)
    Income tax (expense) recovery                           (28)         636
    -------------------------------------------------------------------------
                                                             71       (1,364)
    -------------------------------------------------------------------------
    Comprehensive income                             $    4,555    $   3,706
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF CASH FLOWS
    -------------------------------------
                                                                For the
                                                          three months ended
    (Unaudited)                                           May 1,       May 2,
    (In thousands of dollars)                              2010         2009
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Net earnings                                     $    4,484    $   5,070
    Adjustments to determine net cash from
     operating activities
      Depreciation and amortization                       4,214        4,303
      Amortization of deferred lease inducements           (402)        (356)
      Stock-based compensation                              132          183
    -------------------------------------------------------------------------
                                                          8,428        9,200
    Net change in non-cash working capital items
     related to operations                              (17,586)     (13,177)
    Deferred lease inducements                              236          178
    -------------------------------------------------------------------------
    Cash flows related to operating activities           (8,922)      (3,799)
    -------------------------------------------------------------------------

    FINANCING ACTIVITIES
    Repayment of capital lease obligations                    -         (331)
    Repayment of long-term debt                          (3,269)      (2,576)
    Issue of capital stock upon exercise of options         790            -
    Dividends paid                                       (4,293)      (4,239)
    -------------------------------------------------------------------------
    Cash flows related to financing activities           (6,772)      (7,146)
    -------------------------------------------------------------------------

    INVESTING ACTIVITIES
    Decrease (increase) in short-term investments        (1,000)      36,643
    Decrease (increase) in long-term investments         10,000      (10,000)
    Additions to fixed assets and intangible assets      (8,554)      (5,574)
    -------------------------------------------------------------------------
    Cash flows related to investing activities              446       21,069
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash equivalents    (15,248)      10,124
    Cash and cash equivalents, beginning of period       23,411       10,034
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period         $    8,163    $  20,158
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
    Interest paid during the period                  $      446    $     377
    Income taxes paid during the period                   2,730        6,096
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    SEGMENTED INFORMATION
    ---------------------
                                                                For the
                                                          three months ended
    (Unaudited)                                           May 1,       May 2,
    (In thousands of dollars)                              2010         2009
    -------------------------------------------------------------------------
    Sales by country
    Canada                                           $   69,954    $  70,338
    United States                                           942        1,437
    -------------------------------------------------------------------------
                                                     $   70,896    $  71,775
    -------------------------------------------------------------------------

    Sales by division
    Ladies' Clothing                                 $   43,335    $  41,703
    Men's Clothing                                       10,307       11,144
    Footwear                                              7,310        7,661
    Accessories                                           9,944       11,267
    -------------------------------------------------------------------------
                                                     $   70,896    $  71,775
    -------------------------------------------------------------------------

    Net earnings (loss)
    Canada                                           $    4,909    $   5,308
    United States                                          (425)        (238)
    -------------------------------------------------------------------------
                                                     $    4,484    $   5,070
    -------------------------------------------------------------------------

    Fixed assets and intangible assets
    Canada                                           $   94,670    $  89,000
    United States                                           634          914
    -------------------------------------------------------------------------
                                                     $   95,304    $  89,914
    -------------------------------------------------------------------------
    

SOURCE Le Château Inc.

For further information: For further information: Emilia Di Raddo, CA, President, (514) 738-7000; Johnny Del Ciancio, CA, Vice-President, Finance, (514) 738-7000; Maison Brison: Pierre Boucher, (514) 731-0000; Source: Le Château Inc.

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